Send Letters of Rejection
1. Create appropriate application status
You will first want to create a specific application status such as "Rejected After Phone Interview." Note that you can create any number of statuses for specific situations such as "Did Not Make First Cut" etc.
Follow instructions here to create an application status.
2. Set up an automated notification to go out when the status is applied
Once you've created an appropriate application status, link it to an automated notification. See this article for more information on setting up automated email notifications.